You’re right that Single Payer is probably the best answer for the US. And it is probably where we will end up. But apparently, we have to beat ourselves up some more before the Washington-NewYork elite are willing to face up to reality. So, we’re going to go through a phase of mandatory health insurance — subsidized for low income Americans. And maybe we will at least enforce some efficiencies such as uniform insurance paperwork. Even many conservatives are amenable to that.

The problems we apparently are not going to face up to just yet include:

1. The high cost of training medical personell (who then must make high wages to pay for their education).

2. The high cost of prescription drugs

3. High overhead in private health insurance.

4. Overinvestment in costly diagnostic equipment. (In many cases it would be cheaper to move the patients to the equipment than to provide equipment in diverse locations).

5. Unwillingness to set up an affordable low cost basic health screening network to handle preliminary screening of patients.

has been playing hooky. Look it’s the end of the semester. My actual job involves some actual work these days (ETA of a Thesis defense 40 minutes). Also, I note no popular demand for my opinions on the Obama administration plan to reform financial regulation, and I still know jack about finance.

So I’ll just comment on Paul Krugman commenting on the plan. First, I note, that this is not a jeremiad — the shrill one sees a half full glass. So the reform must be better than I expected. He does have two criticisms (after the jump)

1) Ratings Agencies

Furthermore, the plan says very little of substance about reforming the rating agencies,

WTF ! Have I missed something ? Has a law already been passed forbidding ratings agencies to charge the entities whose securities they rate for “consulting” ? I mean Christopher Cox said that had to be done. Obviously the system can’t work with blatant open corruption of ratings agencies.

The new rules are aimed at bringing more accountability and transparency to the bond-rating system. They effectively prohibit any firms from rating debt they helped structure and bar analysts from accepting gifts or entertainment exceeding $25 in value from the issuers of the debt they rate.

Oh excellent. As far as I can tell, a ratings agency A can charge flybynight financial for consulting on instrument A and rate instrument B and ratings agency B can charge for consulting on instrument B and rate instrument A.

The rule has to be that issuers of instruments have no flexibility at all about how much they pay ratings agencies. Yes that means all new instruments *must* be rated and issuers must pay a standard fee to each of a list of regulator approved ratings agencies unless and until some regulator decides the agency is worthless and takes it off the list of federally imposed mandatory raters, because it’s ratings were not good enough predictors of default.

Come on, fool me once, shame on you, fool me twice … you can’t fool me twice. Back in the good old days the integrity of the ratings agencies was a precious and miraculous national treasure, but wishing for a second such miracle is not a plan.

1) Executive Compensation

“Federal regulators should issue standards and guidelines to better align executive compensation practices of financial firms with long-term shareholder value” — is a description of what should happen, rather than a plan to make it happen.

Here, strangely, I had a concern about strict limits on executive compensation packages. Some fool argued that it would keep the brightest people out of finance. That would be a feature not a bug. Unfortunately, the active margin is work for an investment bank or set up a hedge fund. If the few people in finance who actually have a clue all set up hedge funds, then the all of the people running (and trading for) investment banks which are too big to fail will be fools.

A simple ceiling on compensation for officers of corporations will just make the competent officers of financial corporations become partners in hedge funds.

FP: There has been growing criticism here in Washington that U.S. President Barack Obama hasn’t said or done enough to support those demonstrating in the streets of Iran. Do you think Obama is being too careful? Or even that he is helping Ahmadinejad by being cautious?MM: Obama has said that there is no difference between Ahmadinejad and Mousavi. Does he like it himself [when someone is] saying that there is no difference between Obama and [George W.] Bush? Ahmadinejad is the Bush of Iran. And Mousavi is the Obama of Iran.

I did a bit of traveling – mostly in South America – over the past few decades. GW’s presidency certainly didn’t create any warm and fuzzies for the US anywhere I went. And apparently the same was true in many places I didn’t go either.

But despite that, there is a lot of truth to the quote from FP magazine… Mousavi would probably seem more similar, from our perspective, to Ahmadinejad than we want to pretend he is. And Obama, so far, when it comes to the “bail-out” has been more similar to Bush than most Americans (be they the fighting 25% or the rest of us) would like to admit. __________________________________by cactus

Rdan here with an update for a rally set for Saturday as reported by PressTV, an Iranian based news organization in English:

top Reformist body, made up of influential clerics, has asked for authorization to hold a pro-Mousavi rally on Saturday in the Iranian capital, Tehran.

The Association of Combatant Clerics (Majma’-e Rowhaniyun-e Mobarez) made the request via a letter to Tehran’s governor’s office, Kalameh website reported on Thursday.

The rally is scheduled to be held on Saturday from 4 to 7 pm (1230 to 1530 GMT) from Enqelab (Revolution) Square to Azadi (Freedom) Square in protest at the results of the country’s 10th presidential elections.

You may check James K. Galbraith’s interesting conference paper”. (warning pdf) An important point is that “contrary to popular myth, U.S. economic development has never been solely the result of private investment.”He goes on to demystify the belief that government deficits crowd out private investment and that the US federal goverment relies on foreigners to finance its spending.

“The Macroeconomic Considerations of a Public Investment Strategy” here.

“Interest Rates. Critics assert that efforts to expand the scope of the public sector will drive up interest rates and crowd out private business investment. The accusation is particularly likely to be heard when a proposal explicitly foresees the use of the credit market, deficits, and public debt to finance the expansion.Are these fears justified? There is a two-part answer to this question, the first related to economic theory, and the second to the specific conditions facing the United States in the world credit markets. The theory of “crowding out” is based on a common misconception of the nature of savings in our economy, namely the idea that savings are a “pool,” fixed in size, from which the public and private sectors alike draw to finance their desired rates of spending. No such pool exists. Rather, what we measure as savings is created after the fact, by the spending decisions of governments and private businesses. These decisions create income; the difference between income and consumption (the latter, strongly established by habit), is savings…We can conclude, first, that there is no direct connection between federal budget deficits or surpluses and long-term interest rates.”

“Financing Abroad and the Dollar: The deficit in the external accounts is the accounting counterpart—the exact equal—of the sum of public and private sector deficits in the domestic economy.This phenomenon is often referred to as “borrowing from foreigners to finance current consumption,” but again the shorthand is misleading. When an American purchases a Japanese car, credit is created and extended by an American bank.Rather, a bank loan made in the United States has created a dollar asset, which subsequently has been purchased by an institution (the Bank of Japan) that has no immediate use for it and merely chooses to store it in a liquid, interest- bearing form.”

The federal government is concerned about the incidence of Medicare re-admissions.

Typical scenario: an elderly patient is admitted to the hospital for pneumonia and related distress. After a four day stay the patient is discharged to a long-term care facility.

A week later the patient is readmitted with acute distress, after the nurse requests orders from the patient’s physician. After several days the patient is again discharged to the nursing home.

This cycle is very costly to Medicare, and the feds would like to see it slow down.

(Based on conversations with long-term care nurses and reviews of Minimum Data Set (MDS) summaries, the patients are usually very old, very frail, but not at death’s door quite yet.)

One solution is to ‘train” physicians and families not to be so quick to send the patient back to the hospital. This is tough on families, who often pressure the physician to readmit. Sometimes the patient demands readmission, it is easy for the physician to say yes. This can also be tough on the nursing home, where higher acuities are colliding with the nursing shortage.

A proposed solution is bundling. President Obama mentioned it in his 6/15 speech to the AMA. How does it work? The hospital gets a flat fee per incidence and then has to pay the physician, nursing home, ambulance/transport company, physical therapist, etc.

This requires a lot of administrative work and some intense negotiations, and puts the hospital at significant risk.

Could this work? Maybe. Is it good for Medicare? Probably yes. Good for patients? Unknown. Good for physicians? It depends. ___________________________________________Tom aka Rusty Rustbelt

On ataxingmatter, I considered Michigan’s tough problems and proposed a solution that could offer a way to deal fairly with the many issues the State faces. Michigan, as everybody knows, is a depressed state these days. High unemployment, high foreclosure rates, and even the Red Wings can’t win it all. As two of the Big Three auto companies go into bankruptcy, Michigan is shedding jobs as fast as ice melts on a sidewalk on a hot summer day in Mississippi. Michigan, in other words, has real problems, and real needs that the state government should address.

My suggestion? It’s time to change Michigan’s income tax. Michigan has its share of very wealthy people–just look at the millionaires’ homes in the wealthy suburbs of Detroit, from the Grosse Pointes to those new ‘burbs to the Northeast. But the wealthy in Michigan pay the same flat income tax rate that the middle class pays–4.35%. A family of four starts paying that on wages above the personal exemption of $13,200 (after other deductions, if any). But a family of four with a salary of $500,000 pays the same rate.

Obviously, those few dollars mean a lot to the poor family and hardly anything to the wealthy one. That’s why the federal income tax has had a progressive rate structure since its inception. It’s also why almost all of the states that have a broad-based income tax, have a progressive tax rate structure, generally ranging between 3 and 8 or 9% of adjusted gross income (sometimes as modified under state rules). Only seven have a flat rate structure. See this chart from the Federation of Tax Administrators for a synopsis of state rate structures and exemptions. (Note–apparently, the tables to which I linked yesterday are not accessible at the link at this time. Wikipedia has some of the same information, at this link.)

Michigan should enact a progressive rate structure. How about a zero bracket for the first $25,000 in income, and then a progressive rate structure moving from the current 4.35% on the first $100,000 above that, to 5.35% on the next $200,000, to 6.35% on the next $400,000, to 7.35% on the next $2 million, to 8.35% on anything above $2,725,000. (Look at this study, which has information on city and state tax burdens, including income, property and sales taxes, and you’ll see that Detroit has very high tax burdens–because of the flight of its industrial base and the white flight to the suburbs; so most of the wealthy who work in Detroit don’t live in the city and don’t pay those higher taxes–they live in the surrounding suburbs that can’t be annexed to the city.).

Would people move out of Michigan because of the income tax change? Sure, some in the upper brackets would. (They’re already doing so, of course, because of the Great Recession, which has hit Michigan particularly hard.) But most other states already have a progressive income tax, often reaching 6% on fairly low incomes–so many of those states’ effective tax rates would be much higher than Michigan’s current flat rate and maybe higher than the proposed change. So those that move because of the tax would have to choose a state that had a lesser tax than Michigan’s new one–and states with lower rates may also have a troubled economy. But a reasonable tax of less than 7% on the first $725,000 would make a difference in the ability of Michigan to help create a sustainable economic environment through expenditures for human capital infrastructure (i.e., for K-12 through university funding) and physical public infrastructure. Not to mention that it would also be much fairer, by taxing people on their ability to pay.

Is this a “pie in the sky” proposal or one that has some chance of enactment in the current political climate. A big negative factor that operates at the federal and state level is the anti-tax rhetoric on the right. Tax increases have been an incessant target of the libertarian “think tanks” that oppose most government programs for vulnerable populations and most tax increases, as a matter of faith. Tthese groups have blanketed the internet with PR pieces proselytizing for their faith. See, for example, my various critiques of the the Cato Institute’s Dan Mitchell’s videos for the “Center for Freedom and Prosperity”: CFP’s Laffer Curve Video (Feb. 18, 2008) and The Laffer Curve II–proof? (Mar. 10, 2008) and More Class Warfare from the Cato Institute’s Dan Mitchell (June 17, 2009).

This anti-tax propaganda has made it politically difficult for any person in Congress to address tax increases in a deliberate, thoughtful way. Especially in the Senate, the anti-tax groups’ rhetoric–about corporate taxes, capital gains taxation, and rate structures, in particular–has made it hard to have an open and in-depth discussion of alternatives. As a consequence, the tax agenda in Congress continues to be dominated, to a considerable extent, by objectives that favor those in the top distributional quintile. Take the alternative minimum tax (AMT) as one example. Congress continues to pass annual “patches” to the AMT to prevent the clawback that would otherwise result from the interaction between the lower rates of the regular tax as amended under Bush and the AMT, which was left without corresponding changes. But these “patches” are not limited to much smaller amount needed to keep whole the below-$100,000 crowd. They instead cost many tens of billions annually to keep taxes lower for those most affected in the $200,000 to $500,0000 range. (The AMT generally doesn’t result in additional tax liability for the “super-rich”, since they are ordinarily in the highest tax brackets so their AMT calculation is still less than their regular tax liability.) Yet the patch is urged by the anti-tax rhetoric and touted as preventing tax increases for the middle class. Those same influences are at play in the several states, making it just as difficult to enact progressive tax changes at the state and local levels.

But state legislatures are, for all that, somewhat more exposed to and perhaps even more aware of their local constituencies. The populist distaste for the amount of government money going to financial institutions (and bankers) in the bailout–and the high bonuses for bankers in banks on the public dole–has made an impression. States often have more stringent requirements about running deficits, which has the potential for forcing more decisive action, for good (setting taxes at the right amount to fund needed programs) or for worse (refusing to increase taxe, to ‘starve the beast’, and axing government programs of high importance). The problems are growing more visible, as California’s hobbling by Proposition 13 and its inability to enact needed tax increases has put it in a state of crisis that is shutting the doors to essential state services. See Krugman, State of Paralysis, NY Times (May 24, 2009).

There is some movement in some states. As a commenter noted on the original ataxingmatter post, Wisconsin’s governor proposed an added 1% on joint filers’ income in excess of $300,000 ($225,000 for individual filers), bringing Wisconsin’s top rate to 7.75%. (The budget also proposed dropping the exemption for capital gains, taxed at the same rate as ordinary income, from 60% to 40%.) See Wisconsin Tax Summary 2009-2011, Wisc. Estate Planning and Tax law Blog (Mar. 13, 2009). Meanwhile, Pennsylvania, which increased its personal income tax rate from 2.8% to 3.07% in 2003 in the first change since 1991, is considering at least a temporary income tax increase to 3.57% to avoid cutting state employees and Medicaid reimbursements to hospitals. See, e.g., Hamill, Proposal to Raise Income tax in Pennsylvania, NY Times (June 16, 2009) (noting proposal for a 16% increase for 3 years); Bumsted, Tax increase needed to erase state’s $3.2 billion deficit: Evans, Pittsburgh Tribune-Review, June 5, 2009.

Addendum: California’s Democratic leaders announced today that they intend to send a partial budget fix amounting to $23.2 billion to the governor that will include massive cuts to public education and health and human services, along with $2 billion in new taxes–$1.50 per pack on cigarettes ($1 billion annual revenue projected) and 9.9% tax on each barrel of law ($900 million projected). According to BNA Daily Tax RealTime (June 17, 6:54 pm), Senate President Pro Tempore Steinberg said that “Our biggest argument [with the Republicans] is over the $2 billion in taxes.”

Here is the issue, rational consumer and all that, how can we expect to get costs under control if the billed amounts and the paid/contracted amounts are so far apart? The consumer does not know the contracted rates, so the consumer can not purchase the insurance that pays the least. Thus, the consumer can not be “rational” when choosing health care. (Like we’re rational at anytime with this!) Basically, there is nothing in our current approach to the issue that economic theory would suggest is viable. Or maybe economic theory doesn’t apply?

At the same time, how do we know that these contracted prices are the correct price such that the market is “clearing” properly or in “equilibrium” of some sorts such that there is a reasonable profit for the providers and payers with reasonable cost for the consumer while producing the product of highest quality (as in it did not harm you and did actually help you)? These prices could be distressed prices in that the provider accepts them so that they can capture some of the patients planning to make up the difference in cash patients or other higher contracted fees. For the lawyers that read this blog, we are talking about “contracts of adhesion”. That is a contract signed where one party has most of the power. But then, what would you expect when you exempt a type of business from the anti-monopoly laws. In the past they were public utilities.

This leads to the question of just how can congress and Obama believe (and it is a belief because all examples of what is being proposed have failed in the past, MA being the most recent) their “public plan” is going to ultimately produce the savings that will allow coverage of 50 million more people, better product quality and happy, smiling Americans? After all, if the contracted rates are all over the map, then there will be massive cost shifting either by insured selection or subscriber (patient) deductible manipulation. And, there will still be a need for all the administration to “manage” the care which is in actuality a paper chase game.

We talk about pricing. Medicare wants to reduce the rates and that will just shift the burden onto the privates is the complaint. Well, I got news for all of you. The privates use the medicare fee schedules all the time and then start cutting from there. So, this is a bogus complaint by the privates/non-profits.

I assure you, though you may disagree, there is no way to fix health care via market theory when the approach is to believe that the market is with the middle man; the insurers. Private, public or non-profit, the problem with health care cost and all that leads to can not be found there because that is not the real market.

How much more and for how long do we continue to pay the privates more via Medicare Advantage before congress gets this message that the issue can not be fixed by focusing on a false market? From 2004.

Note this report on Nick Skala presentation of June 4, 2009 in front of the “Progressive Caucus”.

“Bill Gould emailed me after reading my testimony and materials I was going to present to tell me that they were not acceptable and that there could be no comparison between single payer and the public option with side by side comparison,” Skala told Single Payer Action. “Darcy Burner told me that they would construe talking about the public option — even comparing it to single payer — as an attack on the members of the Progressive Caucus.”

Darcy Burner; the candidate that Blue America backed. Head of the American Progressive Caucus Policy Foundation whose tag line is:

organization whose mission is to bring together the collective wisdom of progressives inside and outside of Congress to promote * the health and economic well-being of us all.

Both are caucus’ that should be aware that the people want a medicare like program. The numbers are landslide size. The numbers should completely put to bed the meme of “not politically possible” if this nation actually worked it’s Constitution. And, if there is a caucus that should be working the Constitution as the normal course of it’s function, it should be a caucus that titles it’s self “Progressive”. Certainly a person who was a candidate for Blue America should get it!

Talking about a single payer system to the congress people who are part of a caucus FOUNDED by Senator Bernie Sanders, a “self described socialist” who is promoting single payer every chance he can, is to be construed as “an attack on the members”? ARE YOU FUCKING KIDDING ME! What! Prgressive suddenly do not like to learn about stuff…factually?

“During the presentation it was very nasty,” Skala said. “I got some very dirty looks from Darcy Burner. During the question period and once during the testimony, I was interrupted, told that the Progressive Caucus had taken a position on this issue and unless I had something positive to contribute, then there wasn’t really much point to answering my questions.

So, what does it say about a nation that states it is a democracy and yet the very organizations who should understand the implications of naming one self such, is unwilling to do the peoples bidding? This is not hard folks. A caucus’ job is not to do what is politically simple, it is to make the perceived politically impossible a social reality based on that caucus’ ideals. Well, if your ideals are “progressive”, if you are a part of a group founded by a socialist, and 65 to 70%of the people want something that by all Fox News reports is progressive and socialist then: How much easier can it get?

The CPI rose 0.1% in May as the core CPI rose 0.1% and energy rose 0.2%.

The real significance of the rise in energy prices shows up in this table that shows the composition of real average hourly earnings — the final column in the table.

In the fourth quarter real earnings rose sharply as oil prices collapsed from almost $150/bbl to some $30/bbl.. The large jump in real earnings is probably what drove the first quarter rise in real personal consumption expenditures.

But so far this year real average weekly earnings have fallen 0.6% as the drop in hours worked and rising inflation — largely oil prices — have more than offset a 0.8% gain in nominal average hourly earnings. This is the real threat to the recovery as rising oil prices offset the positive impact of the green-shoots and tax cuts that were apparent in the first quarter.